How credit card payoff works
A credit card is revolving debt with no fixed schedule. Each month the issuer adds interest to the balance, then your payment comes off. Whatever is left after interest reduces what you owe. Because the interest part shrinks as the balance falls, more of each payment goes to the balance over time — the same mechanics as a car loan, except that you choose the payment.
The formulas
Monthly rate r = APR / 12 Each month: interest = balance × r balance = balance + interest + new charges − payment Payment to clear B in n months: P = B × r / (1 − (1 + r)^−n) Months at a fixed payment P: n = −ln(1 − r B / P) / ln(1 + r)
Worked example
A $6,000 balance at 22.99% APR with $200 a month. r = 0.2299 / 12 = 0.019158, so the first month's interest is $114.95 and only $85.05 comes off the balance.
n = −ln(1 − 0.019158 × 6,000 / 200) / ln(1.019158) = −ln(0.42525) / 0.018977 = 45.06, so it takes 46 months, the last one a partial payment. Interest totals $3,011.78.
To be debt-free in 24 months instead, the payment is 6,000 × 0.019158 / (1 − 1.019158^−24) = $314.21, and interest falls to $1,541.04.
Assumptions and limitations
- APR stays the same. Variable-rate cards move with the prime rate, and a late payment can trigger a higher penalty APR.
- Interest is monthly (APR / 12) rather than daily average balance; the difference is usually a few dollars over the whole payoff.
- Annual fees, late fees and promotional rates are not included.
Sources: Consumer Financial Protection Bureau, How does my credit card company calculate the amount of interest I owe?; Consumer Financial Protection Bureau, Credit cards.
Frequently asked questions
Why does paying only a little more than the interest take so long?
Each month the card charges interest on the remaining balance first. At 24% APR on $5,000 that is $100 a month, so a $100 payment never reduces the balance at all, and $150 only knocks $50 off in the first month. Small increases to the payment shorten payoff dramatically.
How does my card actually calculate interest?
Most U.S. cards use the average daily balance: the APR divided by 365 (the daily periodic rate) times the average balance over the billing cycle, times the days in the cycle. For a balance you are paying down steadily, that is very close to APR / 12 per month, which is what this calculator uses.
Should I keep using the card while paying it off?
New purchases add to the balance and usually start accruing interest immediately while you carry a balance (you lose the grace period). If you must use the card, enter your typical monthly spending in "New charges each month" to see the real payoff time.
Is a balance transfer worth it?
A 0% introductory transfer can save a lot if you can clear the balance before the promotion ends and the fee (often 3–5% of the amount moved) is less than the interest you would pay. Run this calculator twice — once at your current APR, once at 0% for the promo months — and compare the interest with the fee.
What about the minimum payment shown on my statement?
The CARD Act requires your statement to show how long payoff takes at the minimum payment and the payment needed to clear the balance in three years. Minimums are usually 1–3% of the balance plus interest, so they shrink as the balance falls; this calculator uses a fixed payment, which pays off much faster than minimums.
CalcNest results are estimates based on the inputs and assumptions above, not financial, tax or lending advice. A lender's official Loan Estimate or your account statement is the final word.